Companies

H&M reports weak third quarter

Sep 27, 2024 Sweden

The Sweden-based fashion group has reported a “slow” third quarter, as sales remained flat and costs hit profits, resulting in a drop in its full year operating profit margin outlook

“The quarter started with slow sales in June due to cold weather in many of our key European markets. In July and August, we saw sales pick up, with even stronger sales development in September. Despite a challenging start, we conclude the quarter with sales on par with last year in local currencies”, commented Daniel Ervér, CEO of H&M.

Therefore, in the third quarter of fiscal 2024, the group’s net sales were flat in local currencies at 59.01 billion Swedish kronor (5.2 billion euros), as compared to the same period of last year. Net sales for the first nine months of the year were also flat in local currencies at 172.29 billion Swedish kronor (15.2 billion euros).

In the three months to the 31^st of August, H&M reported an operating profit of 3.51 billion Swedish kronor (310.6 million euros) and an operating margin of 5.9%, on a comparable basis to an operating profit of 4.74 billion Swedish kronor (419.4 million euros) and an operating margin of 7.8% in the third quarter of the previous year.

“Cost control remained good, but operating profit was negatively impacted by currency translation effects and winding-down costs”, explained Daniel Ervér. As the Afound business did not contribute to long-term sales and profitability, the fashion group decided to wind down the business.

Ultimately, in the third quarter of the current year, the Sweden group’s net profit was 2.3 billion Swedish kronor (203.5 million euros), as compared to 3.3 billion Swedish kronor (292.0 million euros) in a similar period of fiscal 2023.

Outlook

While the autumn collection “has been very well received” and September sales are expected to increase by 11% year-on-year in local currencies, the CEO of H&M acknowledged that consumers’ living costs remain high. In addition, “external factors have impacted our sales revenue and purchasing costs more than we expected”. For this reason, the group now estimates that this year’s operating margin will be lower than 10%.

However, the fashion group remains committed to its long-term strategy of accelerating the pace of improvement in customer offering and “deprioritising things that don’t strengthen our brands or contribute to our sales and profitability”.

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Sweden Companies Fashion H&M Quarter Results Results